- Development & Aid
- Economy & Trade
- Human Rights
- Global Governance
- Civil Society
Monday, October 20, 2014
- As the West imposes what have been called the most comprehensive sanctions on Russia since the end of the Cold War, many ordinary Russians say they have no fear of any economic measures the United States or the European Union may take against their country.
Since the Russian invasion of the Crimean peninsula at the end of last month, Western leaders have been threatening Moscow with economic sanctions.
The threat of sanctions sent stocks on Russian exchanges tumbling and added to what has been a massive capital flight – when investors pull money out of a country’s economy – since the start of the year.
Economists say that the already ailing Russian economy could be severely affected if harsh, targeted sanctions were implemented.
The referendum in Crimea at the weekend – condemned by much of the international community as illegitimate and illegal and which has resulted in the region being set to become part of Russia within possibly months – has now brought the first round of those sanctions.
So far, the EU sanctions will see EU-wide assets of 21 Russian and Crimean individuals identified as linked to unrest in Crimea frozen while those same people face a travel ban. The U.S. sanctions are similar but apply to 11 people.
And although widely seen as limited in scope, further measures have been pledged by the U.S. and the EU if Russia does not move to de-escalate the crisis.
While the Russian government and other politicians have responded by preparing a series of counter measures, there is resolute confidence among many ordinary Russians that Russia is more than strong enough, economically and politically, to withstand any economic assault the West launches at it. The street mood seems defiant, even if economists warn of consequences in the face of strong sanctions.
This confidence is being bolstered by reports in the Russian media, much of which is controlled by the Kremlin.
Since the invasion of Crimea, local media has portrayed the West as colluding with an illegal and reprobate Ukrainian government bent on oppressing the majority ethnic Russian population in Crimea.
It has also played on the widespread belief among Russians that Crimea is naturally a part of Russia – it was made part of Ukraine in 1954 by then Soviet leader Nikita Krushchev. Russian media has now posited Russia as a liberator securing the safety of its citizens in a land unfairly taken from it.
It has also emphasised the country’s military might. On Sunday the head of the state broadcasting network Russia Today, Dmitri Kiselev, spoke on his news show of how Russia remained the only country in the world capable of reducing the U.S. to “radioactive ash”.
Such talk has created a renewed sense of Russian power among many. In a survey by the independent Levada polling agency released this week, two thirds of Russians see Russia as a global superpower – up 16 percent since 2011.
Crucially, newspapers have carried reports saying that the sanctions will only push Russia closer to China and other Asian states and strengthen economic ties with them, replacing any lost trade with the West.
Maria Yemelianenko, 29, a supermarket worker in Moscow, seemed to sum up the general mood among Russians towards Western sanctions. She told IPS: “Russia is a huge country and sanctions could not affect us like they have with other countries in the past. We have a lot of our own resources.
“I am sure President Putin knows what he is doing, and the people of Russia will not go hungry.”
But while many Russian politicians have dismissed the potential effects of sanctions, not everyone is convinced there will not be some repercussions for the Russian economy.
Alexei Kudrin, a member of the Presidium of the Russian president’s Economic Council, was quoted by the Yandex.ru news website as saying that economic growth could be affected negatively and that both foreign and domestic investment could be hurt.
Dmitry Seleznev, 52, an economist at a large agricultural production company in St Petersburg, told IPS that the Russian economy would feel the effects of sanctions.
He said: “Investment growth will fall, the economy may lose its chance to come out of its current stagnation and exports could fall.”
Some economic fallout from the Crimean crisis has already been seen. Russian stocks have been losing heavily since the start of the year, but the falls deepened in the run-up to the referendum at the weekend.
Global investment houses issued warnings last week that foreign investors were pulling their money out of the country at a record rate because of Russia’s involvement in Crimea and that as of the end of last week, financial outflows from Russia had reached 45 billion dollars since the start of 2014 – a 60 percent rise from the first quarter of 2013.
Gross domestic product (GDP) growth forecasts have also been slashed and some stock market analysts have spoken of long-term damage being done to Russia’s ability to attract investment because of negative perceptions of Russia among foreign investors.
Other experts believe though that while the current sanctions imposed by the U.S. and the EU are limited, further sanctions would indeed have the potential to make life ‘difficult’ for ordinary Russians.
Ian Bond, Director of Foreign Policy at the Centre for European Reform think-tank in London, told IPS: “The EU may be forced into a position where it has to apply broader sanctions, for example, to shut Russian banks out of European financial markets. And the U.S. can make life really difficult by denying Russia access to the U.S. system for dollar transactions.
“That sanction has had a major impact on the Iranian economy, for example, and would be noticed by ordinary Russians.”
He added that at that point support for President Putin, which is currently high among the general Russian population, could begin to wane.
He said: “Whether Putin’s popularity would be affected depends on how effective his propaganda operation is. So far it seems to be working well – his popularity in Russia seems to have risen since the takeover of Crimea, and a lot of people seem to be swallowing the fairytale that the new Ukrainian government is full of fascists and anti-Semites.”
One asset manager running a Russian equity fund who spoke to IPS, but asked not to be named, said that Russia’s economy would be in trouble if people’s worst fears were realised and the current situation escalated into armed conflict.
“The country would then be facing huge economic problems,” he said.
This is one thing which Russians do not want though. Despite their support for Crimea’s return to Russia and positive view of Moscow’s role in effecting that change, recent polls have shown a majority are against any Russian involvement in a military conflict in Ukraine.
“The referendum in Crimea went peacefully and people will probably eventually understand it was the will of the people there,” said Sergei Mishkhin, a 20-year-old student in Moscow.” I want Russia to have friendly relations with all countries. We are just hoping for peace.”